GOING PASSIVE

THE RECENT MARKET DIP HAS FORCED INVESTORS TO THINK ABOUT LOW-RISK INVESTING

- BY RIDDHIMA BHATNAGAR

KUNAL VENKATRAMAN, 35, a working professional, has been investing in mutual funds (MFs) for 10 years. Venkatraman has shifted a part of his portfolio to a passive fund from an actively managed fund and is pleased with his move.

The shift has made his holdings “much more balanced,” Venkatraman, who is based in Bengaluru, says. “I am now assured of at least benchmark returns from my core holding, which is now invested in a Nifty 50 index fund. The low cost and transparency tilted my preference towards passive funds.”

Lakhs of individual investors like Venkatraman are increasingly switching to passive MFs—pools of money that mimic the movement of market indices—as a more cost-effective and safer alternative to MFs that are actively traded by the fund managers. Rising investor awareness, proliferation of digital investment platforms, and a range of new products, have contributed to the growing popularity of these funds, say experts.

The debate over the merits and demerits of passive funds has gained extra currency due to extreme volatility in stock markets. Local and global factors, including tensions in the Middle East, and trade and tariff policies of US President Donald Trump have contributed to a 16.5% fall in the NSE Nifty index from its record high of 26,277.35 points in September 2024. The dip has forced investors to think about low-risk investing, which is one reason for their increased interest in passive funds.